Breakenridge: There are no greedy landlords, just a shortage of housing

Politicians learned long ago that you can’t go wrong by sticking up for the little guy. However, that doesn’t mean all such populist appeals are helpful, or even responsible, as evidenced by Mayor Naheed Nenshi’s broadside against landlords last week.

Politicians learned long ago that you can’t go wrong by sticking up for the little guy. However, that doesn’t mean all such populist appeals are helpful, or even responsible, as evidenced by Mayor Naheed Nenshi’s broadside against landlords last week.

Calgary now has Canada’s second-highest average rents in the country, and most everyone concedes that there is a severe shortage of affordable housing in the city. But does that mean landlords are to blame? Or that landlords are unjustly exploiting the situation? The mayor seems to think so.

In a radio interview last week, Nenshi declared that “there’s been way too much (gouging) happening” in Calgary, and challenged landlords to “get a decent return without gouging your tenants.”

But what does the mayor consider to be a “decent return”? Or, for that matter, what does he consider to be “gouging”? Nenshi didn’t say, but that seems an important distinction to draw. How can the mayor challenge us to solve a problem when he can’t define it?

The mayor also noted his own experience as a landlord, pointing out that he hasn’t raised his rent in four years. Of course, having a job that pays $202,000 a year helps. It may be a very different story for a full-time landlord.

But why is it just those who rent property who need to constrain themselves? Should a home seller also limit himself to a “decent return”? Someone who purchased a home a decade ago could now easily sell that asset for double or more. At what point are buyers being “gouged”? If the mayor wants to argue that landlords are “gouging,” then one could just as easily make the case that landlords are being “gouged.”

Nenshi also says he hears stories “every single day” of people forced to move after having their rents raised by “exorbitant amounts.” But even if we give the mayor the benefit of the doubt on that point, he is leaving out something important: someone is willing to pay that rent.

This is an important question: why does the government need to speak up for or come to the aid of those willing and able to pay “exorbitant” rents? If a landlord is seeking only a “decent return,” and a potential tenant offers him even more, should he say “no,” or even be forbidden from saying “yes”?

When vacancies are high and rents are low, tenants can shop around and find a lower rent. That forces landlords to either lower the rent or lose tenants. And while the tenant is doing so purely for financial reasons, we wouldn’t accuse that person of “greed.”

Landlords and tenants don’t create these economic conditions and their leverage is a byproduct of supply and demand. In Ontario, for example, we have Toronto, with the third-highest rents in the country, and Windsor, where rents are among the lowest of any of Canada’s major cities. Are landlords less greedy in Windsor, or is there more going on?

This is all supply and demand. We have insufficient supply for the existing demand, and like with any such imbalance, higher prices are a signal to the market to increase that supply. It’s extremely counterproductive to be demonizing those providing the supply and discouraging those inclined to do so.

Our focus should be on increasing supply. Legalizing secondary suites would help. Removing obstacles to new development would go a long way, too. Maybe we also need to recognize the conflicting goals of making rent cheaper while simultaneously encouraging inner-city living.

Without glossing over the very real challenges we face, would we prefer the alternative? Cities with high vacancy rates and low prices have their own array of problems, as any Calgary resident of the mid-’80s could attest to.

Whatever problems exist in Calgary today, they are not solved by making scapegoats of landlords.

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